As of today, car loans are the most sought after financial products in the Philippines. Cities are expanding and the need for good transportation is rising by the hour. It is today, that your own transport facility is more of a necessity than a luxury due to the already existing substandard quality of transportation facilities in the country. This is also a result of badly managed heavy traffic around the metro.
Whether it is used for a brand new car or a second hand one, all Filipino families, specially all middle-class families in the Philippines have the opportunity to avail a car loan so that they are able to purchase a new car for themselves to ease out the trouble of traveling in the city.
There are two common ways of availing an auto/car loan with the major banks in the Philippines. The first one is the traditional method wherein, the bank already has an inventory of cars that the customer can pick from. In the second method, the customer can pick a car of their choice, which is usually a method followed for second hand cars and the bank then provides a used-car-loan.
Car Loan Calculators
In today’s fast paced world, no one wants to wait to submit papers, send them to the bank and wait till the bank reviews the documents and reverts with whether the loan application is approved or not and what the EMI on the loan could be. People want to know immediately and prefer options that will give them these details at the click of a button.
There are many loan calculators available online today, for us to simply input the cost of the car, how much we can pay as the downpayment for the car and what is the loan tenor that we prefer repaying the loan over. The car loan calculators also require that we indicate whether the vehicle that we are purchasing is brand new or second hand. Once we have entered all the relevant details, the calculator throws up an amount that will be the EMI on the loan and what the total interest amount sums up to over the tenor. The rate of interest applied is also shown on the calculator.
New Car Loan Vs Used Car Loan Interest Rates
Banks offer great offers on loans for new cars. However, one must remember that while getting a loan for a second hand car, the rates of interest are a little higher than they otherwise are. Second hand cars are known to be riskier investments as opposed to the guarantee received on brand new cars. The difference in the rates of interest in the two categories of cars could be as high as 2 to 5 percent more than for brand new cars. Banks are the most widely used and most common form of car financing in the Philippines. All the rates of interest for car loans are easily available online, therefore, you can make an informed decision before you choose a bank to get the loan. These rates of interest help you understand what sort of EMI you will be paying and the amount that you will be repaying in total.
Compare Car Loan Interest Rates from Top Banks in Philippines
Below is a list of banks that offer the most competitive rates of interest on car loans in the Philippines, along with the rates of interest and effective rate of interest that they offer:
|Bank Name||Interest Rate (In percentage)||Effective Interest Rate (In percentage)|
|Bank of Philippines Islands (BPI)||5.21 percent||9.68 percent|
|Security Bank||4.79 percent||8.93 percent|
|Metrobank||5.07 percent||9.44 percent|
|Union Bank||5.22 percent||9.70 percent|
|ChinaBank||5.49 percent||10.18 percent|
|Philippines National Bank (PNB)||5.35 percent||9.93 percent|
|RCBC Bank||5.58 percent||10.34 percent|
|BDO||5.63 percent||10.43 percent|
|EastWest Bank||5.83 percent||10.78 percent|
Documentation Requirements to avail a Car Loan in the Philippines
Although all banks have their own documentation process, there are some mandate documents that all banks require to check your eligibility and repaying capacity for the loan.
To avail a car loan from any major bank in the Philippines, you have to submit documents that act as proof of identity and income. These documents must be government issued and the income related documents must be issued by the employer of the applicant. Apart from these two major documents, the Income Tax Return is a very important one. All resident foreigners are required to submit proofs of income and residency.
- A fully filled and signed application form from the bank.
- A copy of valid Identification cards.
- COE or Certificate of Employment stating designation, length of service and compensation of the employee.
- Bank Statements of the last 6 months.
- If self employed, audited financial statements of the last 2 years and DTI Registration documents are mandate documents.
- If OFW, a copy of the notarized SPA.
The most important factor that determines your eligibility for a loan is that the EMI that you will be paying should not exceed 30% of your monthly income.
In conclusion, do ensure that you build your strategy wisely before you take a car loan in the Philippines. First, check and compare all the interest rates in the market and opt for the lowest one. Take quotations from all dealers as well as lenders and choose the repayment tenor very wisely. You don’t want to keep paying interest for a really long period of time and keep the principal amount for later.
The rates of interest vary from flat to floating and it is always wise to go in for a flat one so that you know what the fixed EMI is. Check your credit score as well and make sure that all documents are completely filled and submitted at the bank. Leave no room for any sort of ambiguity and be surprised later. Calculate your EMI from the bank and verify it again, if need be, using the car loan calculators that are available either on the bank’s website or online.
Also, do not forget to check the processing fee of the loan and know the service charges of the same. Most banks charge this fee as a lump sum one-time payment whereas many others charge it on a yearly basis. Having mentioned this, also ensure that you have the foreclosure rates clarified much before you even take the loan. Try to take one that closes at 0% charges on the loan. And most importantly, look for the best schemes and offers that are available at that point in time. It is always beneficial to have some offers on the loan. It might reduce your burden in the long run, or make it more pleasant for you with attractive freebies as well.